Business activity in the Eurozone took another hit in August as the bloc’s economic downturn extended from the manufacturing to the services sector, data compiled by S&P Global revealed this week.

HCOB’s flash Composite Purchasing Managers’ Index (PMI) for the bloc, a measure reflecting manufacturing and services activity, slumped to its lowest level since November 2020 to 47.0, from 48.6 in July.

The reading was well below the 50-mark separating growth from contraction, and lower than economists’ expectations of 48.5.

Both manufacturing and services reported falling output and new orders. Activity in the EU’s key services industry slumped for the first time this year and plunged to a 30-month low, data shows.

“The service sector of the Eurozone is unfortunately showing signs of turning down to match the poor performance of manufacturing,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said.

Output in the Eurozone has been shrinking for three consecutive months, led by a fifth successive monthly decline in manufacturing, data shows.

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“Excluding the pandemic, the drop in new business was the steepest since October 2012. New orders for goods continued to fall at one of the sharpest rates since the global financial crisis, accompanied by a second month of deteriorating demand for services,” S&P said.

Concerns are mounting that GDP in the euro area will be falling in the third quarter as the bloc’s economy slipped deeper into decline in August.

“Another weak PMI for the Eurozone confirms a sluggish economy with recession as a downside risk. Inflation pressures for services remain stubborn as wage pressures continue to be a concern,” Bert Colijn, senior economist at ING, said.

Hiring nearly stalled in the bloc as companies grew reluctant to expand capacity in the face of deteriorating demand and gloomier prospects for the year ahead, the report said.

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